Ken McElroy - Real Estate Billionaire

www.KenMcElroy.com
https://twitter.com/kenmcelroy
https://kenmcelroy.com/youtube/
https://kenmcelroy.com/podcast/

X: @BrandonDavisR2R
Youtube: @TheBrandonDavisShow

Ken McElroy shares his wisdom and experience in real estate and business. He emphasizes the importance of staying humble and grounded in the industry. The conversation touches on various topics such as the value of wrestling in developing discipline and accountability, the importance of owning cash-flowing assets, and the flaws in the financial system. Ken also discusses the misconceptions about successful individuals and the role of government in incentivizing risk-taking in the private sector. In this conversation, Ken McElroy discusses the resistance to financial independence and the marketing schemes that keep people poor. He emphasizes the importance of having an open mind and continuously learning. Ken also shares his experience during the 2008 financial crisis and how he navigated through it. He highlights the need for affordable housing and the potential impact of AI and machine learning on the real estate industry. Ken advises regular people to focus on hard assets and invest in things like gold, silver, and real estate.

Transcript

Brandon Davis (00:01.892)
So yeah, man, super excited. Like I said, super excited because you're in the flesh now. And to be quite honest, I did some preparation for all of this and I didn't realize how wise you were outside of real estate. And it was a lot of little things. Like for example, you talked quite a bit about people's egos and how people's egos

kind of take them down and screw them up a little bit. And I think that probably comes from a lot of your business experience. I mean, you've been doing this for what, 30 years or so?

Ken McElroy (00:39.406)
Yeah, yeah, it's, you know, I understand when you first start and make a lot of money, you can, it gets confusing to a lot of people and, and they believe that it's them and it might be, you know, maybe they're bold enough to make a move somewhere in something, maybe start a business, buy some real estate, but at the end of the day, it's just, a small little moment and you know, you got to stay humble and grounded in this business.

Brandon Davis (01:03.748)
Yeah.

Brandon Davis (01:07.428)
Yeah, you do. And I think that goes with investing, generally speaking, because it always feels like you understand what's happening, but there's always a bigger fish that sometimes are pulling the levers and you have to set yourself up in such a way that you're very flexible with those sorts of things. So, you know, all right. So this is, this is what I kind of like to do with folks that I interview and it's a little bit different, but I'm going to, I've got about 10 words here, 10 or 15 words.

Ken McElroy (01:25.868)
That's right.

Brandon Davis (01:37.572)
And your job is to react to the words within like three to five seconds. Okay. All right. And this is part of some of the research I did. So it'll be interesting. All right. You ready for your first word? Zeke Jones.

Ken McElroy (01:42.444)
Sure. Yep.

Ken McElroy (01:48.556)
Yes, sir.

Olympia.

Brandon Davis (01:53.316)
Ron Paul.

Ken McElroy (01:57.484)
politician.

Brandon Davis (01:58.916)
Yes, Sparky the Sun Devil.

Ken McElroy (02:02.411)
hot.

Brandon Davis (02:05.028)
What about Oak Creek? Does that ring a bell?

Ken McElroy (02:11.115)
Yep, Orchard Canyon.

Brandon Davis (02:13.252)
Yeah, absolutely. Federal Reserve.

Ken McElroy (02:17.547)
Corrupt.

Brandon Davis (02:18.788)
corrupt. Love it. Dallas Cowboys off the cuff here. Let's see what happens.

Ken McElroy (02:25.323)
Amazing.

Brandon Davis (02:26.756)
MLS.

Ken McElroy (02:31.595)
Fixed.

Brandon Davis (02:34.788)
Yeah, yeah. Wrestling.

Ken McElroy (02:39.019)
Amazing.

Brandon Davis (02:40.196)
And last but not least my friend, Leonard Litwin. Love it man. So we'll kind of get into this and I did my homework man. I think that's important. You know, you hear this all the time. People get on stream with you and they say, you know, tell me your story. How'd you get started? So we'll just do that to introduce you to my folks here and quick real quick here. Like, you know, what's your, what's your story?

Ken McElroy (02:44.427)
mentor.

Ken McElroy (02:51.275)
You said you're homework.

Ken McElroy (03:11.114)
Well, I started like a lot of people. I went to school, went to college. I was wrestling in college, as I think you know, and then I ended up managing an apartment building while I was in my tail end, my senior year. And I got into the business that way. I learned property management and I felt like it was pretty easy because as long as you had good tenants in there and you collected the rent and did the maintenance and kept the place looking nice, which is how I grew up.

My dad was in construction and my parents worked hard. And, and so for me, I, it was like a, you know, duck to water. And, and, and then when I, when I went into the corporate world, I was, I got a business degree and I thought I was going to get into finance, but I just really liked property management, oddly enough. And I went to work for the company that was managing that property and that turned into just an amazing career. I went to this,

This group at the time was called Goodman Management. It was owned by a guy by the name of John Goodman. And John, you know, started giving me more and more properties. I started managing more and more properties. I started learning more. I started learning how syndications were put together. Started learning about, you know, successful purchases and bad purchases and how people make lots of mistakes. You know, in the property management world, if you're not setting a check to the ownership,

Brandon Davis (04:31.588)
Yeah.

Ken McElroy (04:40.489)
You know, you're probably going to get fired. So it's a, and there's a lot of reasons why that can happen. It can be poor management for sure, but it could also be a poor purchase. It could also be a badly structured partnership. And so there's all these things that you learn, you know, it's kind of like the inner workings of a property and people, people, I think a lot of people believe that buying a property is the hardest part, but actually having it produce cashflow.

Brandon Davis (05:09.796)
Yeah.

Ken McElroy (05:09.865)
after you buy it is the hardest part.

Brandon Davis (05:12.726)
And a lot of that comes on the front end. You got to really do your research, right? That's when you make your money.

Ken McElroy (05:17.417)
Correct. That's right. You make your money in how you buy it and how you structure it. And that's, I think a lot of times when people are investing in real estate, they get the courage and maybe they have the money, but they don't realize that those are two of the easiest things.

Brandon Davis (05:36.772)
Sure. Sure. Now I'm going to take us back here real quick. You know, one thing that I've noticed about, you know, people who are successful pretty much in any industry or business line here is, you know, a lot of these folks are pretty competitive and the wrestling part is very interesting to me. and, and here's why it's because I actually put my kid in wrestling six years old, very recently here. And I'm kind of curious from, from a sports aspect.

has that carried over into how you did business in your early years and even now?

Ken McElroy (06:10.921)
Without a doubt, there's a bunch of things that it does. First of all, wrestling, the reason why I like it, especially for a young man, is it's an individual sport and a team sport at the same time. So unlike basketball or football, everything kind of moves around and you have individual stars, but in wrestling, you can actually go on and be a national champion on a team that's not very good if you want.

Brandon Davis (06:21.284)
Mm -hmm.

Ken McElroy (06:39.145)
What always happens is, so I like that because it's both, you know, it's both. And, the, the, the, the, the wrestlers that are. That are at their peak. They're the most disciplined people that you'll ever find because you to be able to like, like I'm going to, I'll go, I'm going to the Olympics actually with Zeke, in, next month and.

You know, I'm going to watch USA wrestling and those guys, you know, they're just, and women too, they're incredible athletes and the dedication and the discipline that it takes is incredible. And so that definitely spills over to, you know, just that hardworking ethic, you know, kind of how America was made really. And it's just a spectacular sport, I think.

Brandon Davis (07:32.708)
I think, yeah, I think, and here's what's interesting for me. Like any, so I boxed, I'm going to get my son into wrestling. I think, I mean, you even look at the UFC now, every good fighter has a substantial wrestling background, all the top guys, all of them. so I think that the cool thing about wrestling is if you get beat, you can't blame it on anybody else but yourself. And I think that's probably one of the biggest things you can agree or disagree. But one of the biggest things that's

Ken McElroy (07:55.625)
Yeah.

Brandon Davis (08:01.828)
lacking in our society is that sort of accountability. To be able to look at yourself and say, you know what, that's on me. What can I do to get better? What can I do not to make the same mistakes? And then you got to move forward. So I think that's huge from, you know, just a character building standpoint for young men.

Ken McElroy (08:21.513)
Yeah, both my sons wrestled and I used to film their matches on an iPad. And then I bought wrestling mats for my house and I had them, I had full Resolite wrestling mats with the circle, the whole deal in my home. And we would break them down, you know, and so you're right. They would go out and like early on they would just get their butt whipped. And then I would show them, you know, what each

Brandon Davis (08:35.556)
Nice.

Ken McElroy (08:50.441)
what was going on, right? And so they were slowly getting better and better and better just by obviously reviewing film, breaking it down and making adjustments, right?

Brandon Davis (08:52.036)
Yeah.

Brandon Davis (09:05.444)
Absolutely man, it's yeah that whole process is so important you can carry that process over into anything that you do in life that self -reflection figure it out adapt change move forward love it

Ken McElroy (09:17.961)
And I think, you know, I mean, I was playing golf yesterday with a friend of mine who was a top college football coach and he's recently retired and he's like, I go, what are you doing in the mornings now? He says, I'm still breaking down film. And, you know, I had to laugh because, you know, you have to analyze whatever move you made or whatever it is that you've just done, even a...

Brandon Davis (09:34.052)
Hahaha.

Ken McElroy (09:45.225)
a good deal, bad deal, good relationship, bad relationship. It is kind of breaking it all down and saying, okay, what am I accountable for? What hand did I have in this? And how could I have done this better? That's essentially how you fine tune as you have to break down the film. You know what I mean?

Brandon Davis (10:06.916)
Yeah, you got to tell me. So one of the react words that I gave you was Zeke Jones and you kind of mentioned him a second ago. Maybe let folks know who he is.

Ken McElroy (10:16.681)
Well, he's I, you can see I'm wearing the Arizona state wrestling. I was, you know, I, he's the coach of Arizona state. He's silver medalist. He's one of the most respected college football or wrestling coaches in the country. he was, the coach of the Olympic team, last Olympics and, and he's just an icon in the sport. And, and, you know, and I, I sported the Arizona state team and I live in.

Brandon Davis (10:19.62)
Yep. Perfect.

Ken McElroy (10:45.737)
Arizona and I just think it's the greatest sport ever.

Brandon Davis (10:51.172)
Yeah. Well, dude, I commend you, man. I think that these sorts of competitive masculine combat sports are very, very important for the development of young men. And I love the fact that you're supporting that.

Ken McElroy (11:07.081)
Yep. That's why I'm doing it. I agree with you. You know, we're, we're pretty soft society and, it's getting worse. It seems like, and you know, in wrestling, there's no participation trophies, you know, like, like you said, you go out and you get your butt whooped and, and that's it. You quit or you don't quit.

Brandon Davis (11:12.228)
Yes.

Brandon Davis (11:26.756)
Yeah, you got to show up. You got to put the work in or you're going to get your butt wet because you can bet the other guys putting the work in.

Ken McElroy (11:33.513)
Yeah, that's exactly right.

Brandon Davis (11:35.556)
Yeah. so, all right, let's kind of bring it, fast forward again here. So you gained all this experience. You got into property management, you're learning business. You're learning people. you know, if you go through any of your videos, you're really big on networking and being a part of the thing that you want to be in. Right. And you talked about kind of climbing the ranks and you're the head of this organization, the head of that organization. So now you're, you've got a.

multi -billion dollar company, right? So, how did you get to that point and how does it feel right now?

Ken McElroy (12:12.297)
Well, I never set out to do this. I always set out just like anyone does. I set out to buy one property and have a cash flow. And that for me, that was a two bed and two bath. I used my own money and a cash flow and a little bit of money. And then I just did that until I ran out of money. And then I realized, okay, now I'm going to have to learn how to raise capital and I'm going to have to learn how to

Brandon Davis (12:32.388)
Yeah.

Ken McElroy (12:40.937)
If I'm going to scale this like I want to and I didn't know what to do. I never bought a property. I didn't know how to meet with a mortgage lender. I didn't know how to raise money. I didn't know, but I did know how to manage it. And I also knew how to spot it because in the property management world, I could step onto a project. I could kind of tell at that point, okay, there's

there's upside in this property because I would have to manage those properties for those people. So I said, well, I should be able to figure this out. So, so I did, I ended up buying one property then two, then three. And I got to tell you, Brendan, each time I didn't know, like, you know, after four, yeah, I started off with a secretary that was a answered the phone. She did my letters, you know, she did my schedule. She did the accounting.

I mean, it was just me and one person. First it was me, then it was me and one person, then it's me and two people. And I just, you know, you're so organically, it starts really slow. I never had this 10 year vision to build a $2 billion company. And so because it happens slowly, you can be really strategic and mindful about who you need and what.

And so now I look back, we got 300 employees and all these CEOs, CFOs, CIOs, COOs. I didn't know how to hire those people. But I had to. I had to go find those folks and I had to become that person to be able to, if I want to scale my business, I mean, each time I'm just punching through my own belief system, to be honest.

Brandon Davis (14:13.316)
Right.

Brandon Davis (14:31.286)
Yeah, man. so I'm going to kind of put this, this was interesting. You, you, one of your react words you talked about, I said, the federal reserve and what did you see? He said crooked or something like that corrupt or, let me ask you this man, because this is really, really frustrating to me. I see, I see people like you, and then I see the media's perception of people like you.

Ken McElroy (14:43.258)
Yeah.

Brandon Davis (14:59.908)
And their perception is that you had to screw somebody to get to the point where you are right now. And what, what I see in my life experience is that you had to make so many good decisions, so many moral decisions and ethical decisions for so many years to get to the point where you are and you're providing such a huge benefit to society. My question to you is now that you're here, now that you've arrived,

as a multi -billion dollar company, what sort of feelings do you have when you hear these sorts of things coming out of the media and from a political standpoint? Just curious.

Ken McElroy (15:38.969)
Well, I kind of understand it. We fall on from this kind of victor to victim mentality for whatever reason. And, you know, and we're a socialist society now, right? Like, so people rely on the government for money and for things. You know, they want them to feed them. They want them to, you know, give them the Stimmi checks and they want to give them the housing and all that stuff. And we're soft.

Brandon Davis (15:52.932)
Mm -hmm.

Ken McElroy (16:05.944)
Well, I came up a little bit differently and I think, you know, it's, I don't care what people think. It's interesting. Like the government, every government, by the way, not just the U S they, they reward people that produce period. So if you produce jobs, you get tax benefits. If you produce housing.

You know, if you produce oil and gas or gold and silver or whatever, like there are, there are, the government needs the private sector. And don't forget all the money that flows up comes from the public, like everything. And that people just forget, like all the money that they're getting comes from other people anyway. Like, you know what I mean? They just tax, they tax. It's, I, by the way,

Brandon Davis (16:50.244)
Yeah. Yeah.

Ken McElroy (17:03.415)
I don't say that it's a bad system. You just gotta understand the system and play within the system. And so, for me, it is interesting that, and whenever I hear people say those kinds of things, I think it's just an easy cop out. I think the people that are in the least control of their financial future or their lives are anybody that turns over,

all of those things to somebody else. So, you know, they, they, I, I was having this conversation yesterday, you know, why make all this money and then turn it over to basically a commission salesperson in the form of a wealth manager or financial planner and, and then just work your butt off. And then one day I go, you know, was it invested? How was it invested? I just, to me, that makes complete.

It doesn't make any sense. And so it's... Well, first of all, it doesn't help the individual at all. You know, there's always a constant battle between Main Street and Wall Street, period. Wall Street wants Main Street's money. They want it in the form of an insurance policy. They want it in the form of a retirement plan or a 401k plan.

Brandon Davis (18:04.164)
Well, why doesn't that make sense to you just to dig a little bit further?

Brandon Davis (18:12.132)
Okay.

Brandon Davis (18:22.02)
Mm -hmm.

Ken McElroy (18:29.461)
or a pension. I mean, that's essentially what they're doing is they're saying, these people are working really hard. So I'm going to take a little bit of this, a little bit of that, a little bit of this. I'm going to incentivize them to put money into these programs and employer matches and all that kind of stuff. That's the system. The same thing with the banks. When like, like when you go make money and you put it into a bank, it's a problem for the bank because they actually owe you money.

because they owe you an expense. It's your money and they owe you an expense on that money. So then they take that money and they use it. And the same thing with insurance, the same thing with pensions, same thing with retirement plans. And so Main Street, you know, it's a big marketing ploy. Main Street is what Wall Street wants. They want all the money from Main Street and all these different things. And there's all these really smart

people making money off of Main Street. And then what they do, how does that money make money? So in other words, if a thousand people go put their money into a bank, that bank has a problem. Because one, it's not their money, but two, they also owe expense on the interest. So then they have to lend it to guys like me. That's the system. The system, if they put it in insurance policy, they have to invest it.

Maybe oil and gas, maybe crypto, maybe gold and silver, maybe tech, maybe this, maybe that, doesn't really matter. The point is they're just taking the money from Main Street and they're investing it for them. And it doesn't help anyone because you, and they've made it super complicated. Most people don't even know what their money's invested in. They just open their quarterly statements, see did it go up or not? Meanwhile, that whole industry just makes 1%.

or two or whatever it is off their balances. So the whole system is a mess because the financial platter makes money when they get new accounts. It's not even based on their performance. So it's a mess.

Brandon Davis (20:41.636)
Yeah. And it's a mess. And then, you know, people come and they, they see some billboard and then it says, you know, earned 1 .5 % here, high, high yield savings account. So then you take your money and you put it in the bank and sure, they use some of those deposits to make money off of, but then they take a lot of that money and they go to a bigger bank and they say, I want to lever up.

you know, I want a 2X or 5X on that money and they use the deposits as collateral. And that bank does the same thing to the next bank upstream and upstream. And then you've got the federal reserve that's involved in all this. That's, you know, manipulating the fed funds rate. And this is just, it's insanity to me, Ken. It's insanity. And I think that one of the only cures for this is for people to understand

the importance of owning your own cash flowing assets. I think that's incredibly important. And I think over the next 10 years, 20 years, it's going to be paramount that people understand more and more of this.

Ken McElroy (21:52.688)
Right, and that's why I do the YouTube stuff and write the books and all that. Everything I do goes to charity. I have a full -time director of philanthropy. And the money that we make for these learning, call it books, whatever it is, all goes right back into financial education. And by the way, the system is a system.

unique to the United States. We have a central bank, Europe has a central bank, the ECB, Japan has a central bank. This is the way the system is. And so the people that understand how it works, it's basically like playing a game of Monopoly. And once you understand that it's literally a game with rules, and now the rules do change from time to time, but

Brandon Davis (22:23.428)
Right? It's not.

Ken McElroy (22:51.471)
That's okay. And all of a sudden your eyes open. You're like, okay. I need to be outside of the system. I need to understand what it is. And then all of a sudden, that was for me, the light bulb moment for me was, okay, I get it. I get it. Like Wall Street's basically harvesting all the cash from Main Street. And then it's putting it out in the form of all these different things.

And it needs to get invested. So don't forget what actually pays everybody. It's, it's, it's, you know, it's entrepreneurs, right? The money's correct. Yeah. That's where all the money comes from. So if I buy an apartment building and I create a lot of value in it and, you know, my, and it goes back to the investors, it just keeps flowing back. It just, it's just, it's just the velocity of money.

Brandon Davis (23:29.796)
Yeah, that the people willing to take the risks. Yeah.

Brandon Davis (23:50.788)
Now, this kind of made me remember something that I wanted to get clarity for, for my audience here from you. And that is why, why does the government incentivize people who are willing to take risks, the private sector incentivize them so heavily to provide these services for society?

Ken McElroy (24:11.98)
Well, they're not very good at it. You know, like, like in my world, you know, that, by the way, I do believe in government. I do believe in social programs. I, I, I do like those are needed. I, you know, we need a welfare system. We, you know, people, people go through rough times and they need a handout. That's fine. It's turned where now they're using it to live on. And that was, it was never intended to be that. And so.

Brandon Davis (24:13.892)
Right. The government.

Brandon Davis (24:25.7)
Mm -hmm.

Ken McElroy (24:42.348)
So for me, the system is fine. It's just gotten to the point to where people are starting to rely on it as opposed to understand it. If you just understand it, then for me, I always say just be the fed. Do what the fed's doing. And the fed's going into debt, okay, it's a good time to go into debt.

Brandon Davis (25:05.988)
Right?

Ken McElroy (25:11.692)
Because if you're going into debt, then you're hedging inflation, right? And that's all. So when things are inflating, just take a look at the house you grew up in. I always tell people this, like my mom's still alive. And this is, it was interesting. The home I grew up in, my mom still owns. And my dad, my mom bought it in the 60s.

Brandon Davis (25:26.276)
Mm -hmm.

Ken McElroy (25:41.195)
and it was 10 grand for this house. They still own it. Now, around the same time, they bought a $10 ,000 insurance policy, life insurance. I didn't know at the time it was 10 grand, but my dad would always say to me, hey, your mom's taken care of, you know, we're good. And back then, 10 grand was a lot, just like a $10 ,000 house was a lot. OK, so my dad passed it away, which is horrible. But now we're digging into

Brandon Davis (26:00.964)
Right.

Ken McElroy (26:10.155)
you know, what, what do they got? So now this, I'm like, okay. So you, it's like the tail of, you know, it's like two different roads. Like the $10 ,000 policy is still a $10 ,000 policy. And it basically paid for my father's funeral. The home is worth somewhere between seven and 800 grand. And, and so, you know, my mom is a hairdresser. So I have like, it just, it's just, it should be that clear. You know,

Brandon Davis (26:37.796)
Ha.

Ken McElroy (26:39.85)
what was the childhood home or whatever your first home that you bought that seemed expensive at the time, it's just going to inflate up. And then if you can just replace yourself with a tenant to have your tenant pay it off for you, you're going to get that inflation. You're going to, you know, so I always say just buy hard assets and have your tenants pay them off. It's actually very simple.

Brandon Davis (27:08.42)
Yeah. And, and, and I think that people don't, they, they don't see all the advantages of, of owning real estate, which is, yeah, the, the debts in your name, but you've got somebody else paying it off. You've got the tax advantages to that as well. And then also not only are they paying it off, if you've done your numbers right, then you've got cashflow as well. And then also as time goes on,

Ken McElroy (27:31.816)
Yep. Right.

Brandon Davis (27:35.876)
you know, due to inflation and other things and limited supplies, the, the values of these things shoot up of your assets as well. So there's, there's really, really big advantages here. And, you know, I guess if you're part of the 0 .00001 % of the world's population that really at least understands this on a basic level, that's like the first big step to, to being, you know, to, to being

the person that you want to be. You want to buy your time back. And that's overused and all that, but it's so true, right? So education is very important.

Ken McElroy (28:15.463)
Listen, I believe that we have a very hardworking group of people. Americans are hardworking people generally. They're certainly getting softer and softer and softer. And I also believe that corporations can be corrupt and there can be bad stuff going on, but so can the government. And that's never going to change. But people just got to take control of the financial future.

And then do what they want, like period. Why turn your money over to a commission salesperson that really is not incentivized with your success? I just don't, I don't get that. I would rather put it into something that I can control a little bit. My sister was a bookkeeper at a

medical clinic in a little town of Everett, Washington where I grew up. And she slowly over a period of time just started buying a rental house here and a rental house here and a rental house here. She's got millions of, she's got millions of net worth and she never had like this huge retirement plan or anything because she literally was a bookkeeper. And, and, you know, and so now she's completely financially set when she retired just by using the same model.

Yes, there were times where they had to go clean units and maintenance units. And yes, they had some tenant issues from time to time. But most of the time, you learn over time. Just find somebody that pays their rent on time and you have a great reciprocal relationship. We're in a renter nation. So, and if not you, who? Like somebody's gonna be, somebody's providing that housing, somebody's collecting rent.

Brandon Davis (30:01.188)
Mm -hmm.

Ken McElroy (30:10.372)
somebody. It's not the government. It's the private sector. And so there's this resistance. And the real reason is Wall Street doesn't make money if people go out and are independent and create their own financial security. That does not make a nickel. So that's why they always redirect you back to stocks and bonds.

Brandon Davis (30:26.148)
Right.

Ken McElroy (30:37.027)
you know, all these crazy marketing schemes to keep people poor and dumb, really.

Brandon Davis (30:43.94)
Well, and I think like the 401k, like it's a, it's government sanction. It's one of the most marketed things in all of history in terms of a financial product and the everyday working man dumps a portion of his paycheck, every single paycheck, millions and millions of paychecks every single month into the 401k, which is actually feeding wall street. So people don't think about it that way.

Ken McElroy (31:05.987)
Correct.

Brandon Davis (31:08.708)
And they just, they trust too much. And another thing I want to point out, like, and I'm going to ask you for your recommendations here in a second, but most people are only one or two skills away from getting way ahead. They just don't understand what those one or two skills are. And they think that those one or two skills are very, very difficult to comprehend. And they're not, that's been my experience. Have you seen that sort of thing?

Ken McElroy (31:36.547)
Yeah, I do. People are pretty resilient. And sometimes it's just keep it's having an open mind and and being in a different room. You know what I mean? Like like it literally is. And what I've learned is, you know, for me to be able to scale our business to what it is, I've had to I've had to unlearn and then relearn because you know, we all have a buy. We all have bias.

Brandon Davis (31:40.772)
Yeah.

Ken McElroy (32:05.634)
We all have a software running in our brain that tells us, you know, when we look in the mirror, we see something. And that is a, that is literally a reflection of, of your past. And, and it's the same thing with money. It's the same thing with relationships. It's the same thing with food. It's the same thing with exercise. It's the same thing with government. And so you, you always got to kind of keep that in check, in my opinion, because

you know, when somebody's talking, most people don't really listen to learn or listen to understand at all. They're usually just holding on to their own position. And so when, to your point, when you start to realize that if you just have a little bit more of an open mind, then more stuff will come in. It's there. It's all around.

Brandon Davis (32:43.14)
Yeah.

Brandon Davis (33:01.28)
Have an open mind more stuff will come in. Let's quote that. I love it. Yeah

Ken McElroy (33:04.416)
It's true, man. Like, I mean, I, I learned so much and what I think Robert Kiyosaki taught me this because what he is so smart, he's always reading 15 to 20 books at the same time at all. And every time we get together, it's always the same thing. What are you reading? And I have really good friends that do the same thing. And we, you know, we're emailing books and emailing podcasts and stuff back and forth to each other and texting each other.

And it's always the same thing. What did you learn? If I go to a conference, he's like, well, what did you learn at the conference? Because Robert is probably the epitome of somebody that's always trying to change his view on things. And most people go through life with a really rigid point of view on whatever it is, and they just don't hear any, you know, I don't know, they feel like there's risk somehow.

But it's literally, it's a software that's been developed from parenting and from teachers and mentors and coaches and experiences and shocks that they've had or whatever it is. And that's who they are. That's where they sit. And that's.

Brandon Davis (34:21.252)
I've been, I've been punished so many times, Ken, for, for thinking that way. I think I'm finally, I'm finally out of my wayward ways. it's because it, and again, it's ego. That's what you, I've seen you talk about quite a bit where you sit up there and you talk to somebody and, and you just, you hear what they say, but you don't listen to it. And you, you really sitting there thinking that you know better than these people, or you're on par with these people. And it's like,

I thought I knew but I don't really know but I'm gonna act like I do and that's not a good way to do business and I think a lot of us go that route these days a whole lot of us and We're afraid to listen

Ken McElroy (35:04.638)
I'll tell you, if there's one thing somebody can take from this podcast.

You'd be very, if you just sit and are curious and just ask people about what's going on with them, what they know, what they think. I mean, I do this all the time. They'll go on and on and on. They won't even ask you a question. They won't even know who you are. And I'm just saying, I actually do that a lot, like every single day, because I'm always trying to find like, that's interesting.

wow, that's cool. And most people, that's not how conversation is. It's unbelievable to me. But if you're just a little bit curious and also willing to shape the way you think about something, then I've found personally that that's my own little personal development, right?

Brandon Davis (35:49.028)
Mm -mm.

Brandon Davis (36:06.82)
Yeah, I think for me personally, podcasting is kind of like a form of self therapy in a way because you can't talk to, but so many people on a podcast. And if you're talking about yourself most of the time, then you're not going to get too many people talking to you that much. And, and the, and you really got to beat back your ego and you got to ask the questions. And, and a lot of people are afraid to look like they're maybe intellectually weak.

Ken McElroy (36:13.788)
Yeah.

Brandon Davis (36:36.452)
by asking questions of somebody that knows more than them. And I know that sounds crazy to some people out there, but that's just the case. And actually I've felt it and that's that ego coming through, but it's so important to strip that away and just open your mind because more stuff can come in, right? Yeah.

Ken McElroy (36:53.083)
Yeah, I mean, you know, it's true.

Brandon Davis (36:56.804)
Yeah. I wanted to talk to you about this. So in the 2008 financial crisis, I understand that you were kind of, you were in the midst of executing on a pretty significant deal, but you had been doing that deal for a while. Can you kind of talk about what happened when the floor kind of fell out?

what happened with that deal and then I'm really interested to find out like how do you go about breaking that information to the people who decided to invest with you and what's that look like? Because that's scary to a lot of people.

Ken McElroy (37:37.979)
Yeah, yeah. Yeah, yeah, of course it is. So some people went through 2008, some people haven't, but you know, a lot of the signs that I'm seeing right now are very similar. You know, what happens prior to that, I think it's important.

You don't see what you don't see right like and so you plow through with this confidence and courage and maybe limited wisdom and And you believe that next year is gonna be better than last year and that's what's happening right now. So a lot of people bought And so so that period of time I I look at well that that was a learning period of time because I lost money I lost investors money during that time and it was a condo conversions that we

doing. We were buying apartments and we were converting in McCondos and we did very well on a lot of them. And then at some point the music stopped and what happened was that Wall Street stopped funding investor loans because they started to, people started not to pay. And so the whole thing kind of came crashing down and so I was in the middle of a project

that was converting apartments to condos. So essentially rental housing to ownership. And we got caught in the middle of this project. Now to this day, it's the only, it's one project, it's the only project that I lost investor money on, including my own. Yeah, but I will tell you, you don't learn a lot of,

Brandon Davis (39:19.332)
And it still pisses you off.

Ken McElroy (39:27.127)
when you're making money, like when things are going really well and you're like, yeah, I knew that would work. When they don't, that's when you learn. That's when the contracts come out. That's when the lender conversations come out. That's when the investor conversations come out. Try to unwind things. That's when you learn the most. And so that period of time, that was like 2007, I think, 2006.

Brandon Davis (39:29.54)
Mm -hmm.

Ken McElroy (39:57.398)
The, don't forget, I wasn't the only one. There was, gosh, thousands of people. And, you know, the great financial crisis, you know, hit after that and banks started taking back all this real estate. And, and, and so there was a lot of pain in the area of real estate because people that own real estate, it was worth less than the loans and they were giving them back to the banks and the banks were

Brandon Davis (40:00.964)
Right? So many.

Ken McElroy (40:25.238)
taking it in the shorts and the banks are supposed to own real estate and all this stuff is going on. Well, that's also an opportunity if you think about it. And when it's easy to buy, things look really successful, right? When they're going the other way and the banks have a problem and real estate investors and real estate developers have a problem.

That's actually when the best time to do deals.

Brandon Davis (40:59.236)
But you gotta have cash or you gotta have the means to do so. So you gotta plan ahead for these sorts of events too, I'd imagine.

Ken McElroy (41:04.565)
Yeah, yeah, for sure. And so just go back to 2008, 2009, 2010. And just what was going on at the time, if you think about it, investors had lost a lot of money. Banks were owning real estate. Their stock prices were going down. There was all kinds of government involvement because they were trying to prop up everything and make sure the financial system.

Brandon Davis (41:13.892)
huh.

Ken McElroy (41:33.428)
So it was chaos in the U .S., right? And so everything kind of went on standstill. And oddly enough, this period of time is what created the problem for the under -supply housing, because the banks were not lending in 2009, 10, 11, 12, because they were still unwinding all these problems. And yet people were still being born and people were still graduating from college.

So the population was still growing, but there was no housing being added. And so what was happening is that, and then people were falling out of single family into back into rentals. So the ownership, ownership of housing went up to about 69 % during that time. And then it went all the way down to about 63, 62, 63. Now that doesn't seem like a lot, but each 1 % is like a million people. So essentially,

Brandon Davis (42:20.1)
Mm -hmm.

Ken McElroy (42:33.043)
George Bush was said the American dream. Everybody needs to own houses. And so everybody was buying houses with these crazy loans, et cetera. And then Obama kind of got the brunt of it. But that all kind of poured back the other way. So people moved from ownership to rentals. That's what. Yep, that's right. And that's what made the rental market strong. So so what was happening is there was a shift from ownership to rentals. So I was like, this is a great opportunity to be a landlord.

Brandon Davis (42:49.252)
subprime mortgages. Yeah.

Ken McElroy (43:02.482)
because you have people that were traditionally homeowners forced into the rental market. And so that's happening now, right now as we speak. And so when you look at it more on a macro basis, now the problem is, as you pointed out, you either have cash or you find somebody with cash. And so for me, I was like, I went to Canada and put together a...

some funds, big funds, hundreds of millions of dollars, and we started buying Texas real estate with Canadian dollars because the Canadian dollar was strong, got stronger during that period of time. So if you're Canadian, the U .S. looked like it was on sale. Actually, the rest of the world, the U .S. looked like it was on sale.

Brandon Davis (43:41.988)
Mmm, relative.

Brandon Davis (43:52.836)
So this, so for the, for the audience here, so, you know, if you have, if you have an economy that is not doing well and you're in a currency that's not doing well, what you want to do probably is, you know, you want to put,

You want to use the purchasing power of the strong currency and you probably want to put your debt maybe in the weaker currency as well. And that kind of creates a spread and a margin. So you're saying that you use Canadian dollars to buy up Texas real estate.

Ken McElroy (44:26.)
Yeah. Yeah. Cause again, like, if you're in Canada, like I'll tell you, as a kid, as a 10 year old kid, my dad used to take me up to Vancouver. And I remember I would take a $10 bill and I would come back with 13 or $14 worth of change. And so, so people didn't understand. I was, I was hedging currency back then.

I would come back because in the US they would take a Canadian quarter, they would take it at like a 7 -11 or a Circle K or whatever. And so I was basically, you know, I was making 30 -40 % of my money as a 10 -year -old. So I always watch the dollar, our US dollar as it compared to the Canadian dollar. And the Canadian dollar during that time, during 08 -09 -10, started to be about par. And this is important.

Because now imagine if you're in Canada and real estate is crashing and your Canadian dollar is now equal to the US dollar. So the Canadians are like, this is incredible. I now have our dollar strong, the Canadian dollar, and the US is on sale. So this is precisely what happens when economies fall like

It doesn't matter where, it could be Zimbabwe, it could be wherever. It happened in Mexico when they devalued the peso. The people on the inside, what they do is they put their money into, to your point, into countries that have a more stable currency. Yes, yes. Yep. Yeah, and this goes on. I mean, this is why you hear Russian oligarchs

Brandon Davis (46:05.124)
Iraq, right? That happened. Is it the Denari or is that completely, yeah.

Ken McElroy (46:15.31)
buying New York penthouse. And this is why in the 70s, the rich from Japan started investing in the US. And so you start to see, when you really start to look at the way money moves and you really need to understand how currency works, and it's really, really complicated. Think about a company like Amazon, let's say, or...

Brandon Davis (46:16.644)
Yeah. Yeah.

Ken McElroy (46:43.725)
you know, Facebook or whatever, you know, these are worldwide companies, right? And so when you start to see how the money moves and how it's exchanged and where they're trying to keep it, it starts to become super clear.

Brandon Davis (46:48.164)
Yes.

Brandon Davis (47:00.068)
Yeah. And I can't imagine how complicated that is to have these teams all over the world that have to monitor. You know, you can make the wrong move in one country and then that can really have an effect on the rest of the business. and this kind of brings me to another question I had for you. what about, what about how AI machine learning is going to

kind of play into real estate moving forward in relatively quick amount of time, next five to 10 years, like how is that going to affect things in your mind?

Ken McElroy (47:35.084)
lot. It's already, it's incredible what's happening. You know, it's funny, I'm bringing a, I do a big conference every year in Dallas called Limitless. And it's this year, it's August 29th, 30, 31st. And one of the guys that I really sought after, his name is Eric Su, S -I -U, incredible guy. And you know, he's, he owns media companies, but he, he's going to talk about

you know, essentially where AI is heading and how you can use it in your own business. For us, you know, we're seeing it in every single way. I mean, you know, the customer wants things super easy. So in customer service, we're seeing it in virtual tours, we're seeing it, you know, on all our paperwork, you know, and we're seeing it in accounting, we're seeing it in marketing, we're seeing it, you know, automatic, everything's becoming automatic. And I think we're

Brandon Davis (48:20.292)
yeah.

Ken McElroy (48:31.915)
you know, we're at the very, very, very beginning and unfortunately, it's gonna replace out some of those lower paying jobs.

Brandon Davis (48:42.5)
Yeah, that's, that's going to happen, but it also, it's also going to create new sorts of demand in the economy. You know, for example, I read a paper recently called situational dash awareness dot AI. That's where it's at. And it kind of outlines from a gentleman who was in Silicon Valley who came out of open AI. It outlines, you know, what the world's going to look like to be able to prop up.

and be able to support the infrastructure necessary to create these, these machines. And one of the things that he talked about was a massive shift in GDP spending towards building out cities of power grids, just absolute cities, concrete companies. You've got the superconductor manufacturers, any companies associated with nuclear energy.

any companies associated with natural gas. The United States has huge stores of those. So there's going to be a huge infrastructure shift, it seems. And I think that's also going to affect real estate in many different parts of the United States and the country, because they're going to have to, the government's going to have to buy up a lot of this land to put this infrastructure on as well. Yeah. Tell me about that.

Ken McElroy (50:02.312)
It's already started. Yeah, no, you're right. I tell you what people, you know, in the political world, you know, they've got this Green New Deal, which everybody knows is, by the way, I think we should be looking at all these things, but it just doesn't, the math doesn't work. Well, now you're gonna start to see, because of AI, these nuclear power plants, period. I mean,

People are talking about it. Musk is talking about it. And guess what? Bill Gates already broke ground on one in Wyoming. So it's already here. And so nuclear power plants are definitely needed in order to run because of the energy that's needed for AI. And so to your point, we're at the very beginning, but the insiders already know.

Brandon Davis (50:51.62)
Yes.

Ken McElroy (50:59.08)
And the government is going to be shipping their narrative very soon on nuclear power. You watch. In the next 10 years, it's all going to be about nuclear power.

Brandon Davis (51:03.46)
quick.

Brandon Davis (51:09.732)
Well, and it's got to be because it's a national security thing. If China is going to be investing this sort of money in the energy infrastructure and Russia is going to be doing it, the United States has to do it as well. Because if their machines, because they have more power, their machines are stronger, then that's a weakness for us. So we got to keep up. It's like a race, arms race.

Ken McElroy (51:21.511)
Correct.

Ken McElroy (51:29.254)
Yep, that's right. You got it. That's exactly right. So it's gonna they're gonna have to shift their narrative because the whole the whole world's doing

Brandon Davis (51:38.884)
Yeah, love it. So I want to shift real quick here and I like to keep these at about an hour. Okay. I think that's reasonable. So there's going to be a lot of people that, that listen to me here. A lot of the folks that listen to me, they're more politics related and, and crypto. And I give like a macro perspective of what's going on.

Ken McElroy (51:46.854)
Okay. Yeah.

Brandon Davis (52:03.556)
What can regular people do, man? And, you know, what can they do to change their lives? I will say to the audience that, you know, I endorse Ken because I have gone through his programs and understand his stuff. And he's a no fluff type of guy. He cuts straight to the chase, but I don't know what sort of things you have educationally right now for regular folks to win.

Ken McElroy (52:28.838)
Yeah, you know, it's a well, you got to step back from the whole thing. First of all, look at it from a macro standpoint. And I think you start there because that actually provides the direction. So, you know, do you believe and do we believe that we're going to see a lot of inflation in the next 10 years? I would say the answer is yes to that. For a lot of reasons, it would go down all these rabbit holes. So we definitely have that.

Brandon Davis (52:53.284)
Yes.

Ken McElroy (52:58.82)
Do we believe that we're under supplied with US housing? The answer is unequivocably yes. That is a math issue. You know, you've got the population going like this and we have not caught up. So we're under supplied on housing. That is a yes. And it's starting to show up already in the higher rents and the higher housing prices and stuff like that. Okay, so you have those two things. Those are gonna happen.

Then, you know, do you do we believe that the cost of housing is going to be more as a result of those things? And I still think the answer is yes, there's going to be periods of time where there'll be some softness in some areas based on construction. But if you really think about it, if you follow the Federal Reserve, they have been increasing rates, as we know. And so what happens when rates go up? People pull back.

That's what the Fed wants. The Fed wants the economy to slow down. Yes. Okay. So that's happened. So what did that do? That stopped the new construction of housing, not completely, but largely. And yet people are still being born. And then now you sprinkle in immigration, which is a super political issue, but it's also a housing issue. So, you know, you can step back from it.

Brandon Davis (54:03.14)
Kill the economy, yeah.

Ken McElroy (54:27.459)
bitch about immigration or you can just look at it practically and say what's going on with it. Well, you know, there are cities and states that are that are master leasing hotels and their master leasing apartment buildings and their, you know, their building housing and they're providing money and all that kind of stuff to these immigrants. Okay, that's a population gain. Okay, so all of those things are going to happen now and you just can't argue those. Okay. All right, so.

Knowing that, I believe that we're going to head into a very unaffordable period of time for people. You're gonna, you know, it's gonna really start to show up in the next few years. You're gonna start to see rents go up and the housing prices are not gonna slow down anytime soon. So it's gonna just shove more people from, again, from homeownership into rentals. And Brandon, as you know, what's supposed to happen

Like I have young kids in their 20s. They're supposed to come out of school. They're supposed to build their credit through some kind of rental somewhere, work for somebody, put some cash away, buy that first house, and then build the equity from there. That's a traditional system. We're not in that system right now. There's no affordable housing. Rates are high. And if the Fed lowers rates, it just creates another bubble.

Brandon Davis (55:53.732)
Right.

Ken McElroy (55:55.811)
That's the situation we're in. And so people can get angry with it or they could say, okay, how do I benefit from that? And so for me, we've decided to buckle down and hunker down and start to buy as much housing as we can because there's going to be more renters. And this kind of goes back to your other point. Well, you know, that's taking advantage. We're taking advantage of a situation that we're not in control of.

It's just going to happen. And so what people can do today is they can start to look at affordability and understand that that's going to be a huge problem moving forward. And you might even be in a situation where you're going to buy things and inflation is going to do its thing. And the government might even give you the cash to your tenant or to you.

to provide housing, we have a housing problem. And so, you know, a really simple thing to do is just look for affordable housing, provide affordable housing. I think you're going to start to see this ADU, an accessible dwelling unit, it's going to just spike over the next 10 years. You're going to start to see relaxed zoning for tiny homes. You know, you're going to start to see 300, 400 square foot homes.

Brandon Davis (57:10.436)
Mm -hmm.

Ken McElroy (57:22.174)
I met with a woman last two weeks ago. She's doing a 350 square foot homes up in Canada, be into areas that are out affordable and the government's liking those because you know, the rents are less and that's the opportunity and you know, anybody can, affordable housing is not sexy, but it's gonna be where it's at for the next 10 years.

Brandon Davis (57:48.9)
Well, there's going to be a need for it. So somebody is going to provide that. Right. And what about, what about my listeners that, you know, we've got, we've got doctors and we got lawyers and we got all sorts of folks. Like what sort of things can they do to take advantage? What you, I understand that you might have something to talk to them about as well. Maybe.

Ken McElroy (57:51.198)
Sure, yes. Yeah.

Ken McElroy (58:10.366)
Yeah, well, I think the hard assets is where it's at. You know, so if you're going to like I'm in oil and gas, I'm in gold and silver, but I'm in real stuff like physical, right? Not paper. So Chris, one of my friends, Chris Martinson, who's coming to our Limitless Conference, talks about the three tiers of wealth at the very base. He calls it primary wealth. That's water. That's timber.

That's gold, silver, oil, gas, you know, all the stuff that comes out of the ground. The second category are the companies that extract that you can invest in those. And then the third at the very top of the riskiest is paper, all the derivatives, you know, the, the ETFs, the stocks. And so if you just focus on that core base and those are hard assets, they'll move with inflation. So, you know, so that's just a simple little strategy. So I,

You know, when you mentioned Oak Creek, the Orchard Canyon property I bought, I bought it because of the water rights, actually. That's why I bought it. Yeah, it's, it's, you know, the water rights are really, really worth a lot. and so you start to take a look at the world differently and you don't, you know, you

Brandon Davis (59:14.82)
Mm. Okay.

Ken McElroy (59:28.606)
The worst thing you could do is turn your money over to somebody else and not fully understand what it's invested in.

Brandon Davis (59:36.74)
I think so if I'm putting myself in your shoes, as you gain this experience, you're able to kind of, you're able to size up the world and then differentiate what has value and what doesn't based on your experience and be able to seize on that. Yeah.

Ken McElroy (59:50.59)
Yeah, correct. Yeah, and do it direct like, you know, like anyone can go buy a silver coin or gold coin from from somebody, you know, like and I've been doing that for years. And so my friends, you know, by the way, I'm not a gold bug. I don't actually buy it for investor investment. I'm actually buying it to heads the dollar. Yeah.

Brandon Davis (01:00:17.796)
got it most people yeah and you and you feel like gold is just gonna go it's gonna go up over the next 10 years

Ken McElroy (01:00:25.31)
I do. There's a reason central banks are buying it. And the US is printing like crazy. And the world's kind of not very happy with us because we're the world's reserve currency. Everything's traded in dollars, not everything. And they're starting to wean off of that, as other countries are. And we're using the dollar as a weapon. And so people are converting their dollars into physical metal.

That's definitely happening.

Brandon Davis (01:00:57.572)
Yeah. Well, Ken, man, it's been a really good conversation. I appreciate it. My goal is to kind of make this interesting and not the same mundane sort of interview. and I think people got a good opportunity to kind of peek into who you are outside of real estate as well. And I appreciate you being open with me about that. Yeah, man. Yeah. Yeah, it's great.

Ken McElroy (01:01:18.526)
yeah, of course, Brandon, man. It's always good chatting with you, man. Good luck. This is a fun project.

Brandon Davis (01:01:26.628)
So, are your social media sites, kinmackleroy .com? Where can folks find you?

Ken McElroy (01:01:31.646)
Yep, KenMacro .com, just go there. Our company is MCCompany, MCCOMPANIS .com. The big thing we got coming up is our Limitless Conference. We have 50 speakers, three stages. We've got about 2 ,000 people. And, you know, we have crypto guys there. We have oil and gas. We have gold and silver. We have obviously some real estate. We have a lot of entrepreneurs. We have marketing and people that are killing on YouTube. So it's kind of a...

It's a financial freedom conference. So that's the big thing. I'll be at that personally, all my whole team there. Super excited about that one. And that's at, it's called Limitless. It's called limitlessexpo .com.

Brandon Davis (01:02:07.14)
Okay.

Brandon Davis (01:02:14.116)
Okay, perfect. Alright, limitlessexpo .com. Outstanding, Ken. I'm gonna stop this now. You can hang around here in the green room, but I really appreciate it again, man. Alright.

Ken McElroy (01:02:24.119)
Anytime.